Oxford, England - 4 March 2009 – In the current economic downturn companies have realised that an efficient sourcing and purchasing process is a crucial factor in cutting costs and driving business forward (Handelsblatt Business Monitor). IBX, provider of consulting, services and solutions for efficient purchasing, has launched the ‘Sourcing in a Downturn’ initiative to help companies reach their financial goals. It is a multilevel programme designed to realise savings opportunities and optimise cost structures in all major product categories through a central purchasing role. As part of the launch IBX has developed a supporting paper, which outlines how sourcing of categories with the highest price volatility such as temporary labour, consulting and marketing services, provides the biggest savings opportunities.

IBX Sourcing in a Downturn gives a new perspective on how to identify and realise savings in indirect materials and services by focusing on effects of demand elasticity on sourcing tactics. The chief purchasing officer (CPO) is as the primary manager in capturing all external costs – services, indirect and direct materials.

“Right now is a good time to gain control of categories that historically have been off limits for the purchasing function”, says Christer Hallqvist, cofounder of IBX Group and one of the founders of the initiative. “By making purchasing officers a central, strategic officer in an organisation, business decision makers can regain the capability to drive efficiencies to ensure optimal outcome.”

Where are your savings opportunities?
The central element of the IBX Sourcing in a Downturn initiative is the commodity analysis that identifies categories for potentially high savings through understanding the market and commodity dynamics. Factors of demand elasticity (which relates to how demand changes as the economy evolves) and fixed costs of single commodities can be classified, as illustrated in the graphics below.

(See http://www.realwire.com/writeitfiles/IBX_Graph.JPG)

•   The categories on the right side of the matrix have been strongly affected by the market dynamics in the financial downturn. This results in the greatest savings potential.
•   The categories on the left side of the matrix are less susceptible to market dynamics, however it is important not to neglect them during tough financial times as they can still generate potential short-term benefits.
•   Categories with the highest price volatility shown in the bottom-right corner should be treated as candidates for spot buying. For instance, the market of commercial print is highly affected by the economic downturn. Due to high investments and low margin, spot buying for commercial print can yield very strong returns.
•   Categories displaying price compression effects on the other hand, as shown in the upper-right corner, are potential candidates for frame agreement sourcing in the same economic climate.

When the purchasing organisation has identified the commodity groups with the highest savings potential, the second step within the IBX Sourcing in a Downturn initiative is to re-evaluate the existing sourcing strategies. If necessary, the current sourcing strategy will be redefined and an action plan will be created. With the implementation of new frame agreements the savings can finally be secured.

“A well-designed downturn programme should reveal savings opportunities, set appropriate sourcing strategies to be implemented accordingly and then ensure that the new contracts are implemented and used”, comments Bjoern Stenecker, Senior Manager and Head of Consulting, IBX Group. 

Webcast “Sourcing in a downturn”
To learn more about this initiative, please register for the IBX webinar scheduled for March 10, CET 16.00, during which there will be a discussion on the insight paper. During the webinar, the IBX Consulting Group, including the authors Christer Hallqvist and Bjoern Stenecker, will explain opportunities and sourcing approaches to how purchasing officers should handle the current recession. Questions can be posed after the online-presentation. Already 140 purchasing professionals have signed up to this webcast, there are currently 60 seats remaining.

Please sign up here: http://www.ibxgroup.com/webinar

The complete insight paper can be ordered here: http://www.ibxgroup.com

For more information on purchasing trends, please visit IBX blog http://purchasingtransformation.ibxeurope.com/